Views on EMV (chip & pin) usage in the US?

[jsucool76]

how does EMV work with online purchases? Is it basically just the same as here, you put in the CC number and pay online, or do they have some other special system they use for that as well? 

[trumpet-205]

EMV is for offline (retail) transaction only. Although some interesting concept does arise with strengthening online transaction. Things like,

* Verified by Visa or MasterCard Secure Code

* Virtual Account Number

* One time used code generated from a terminal (You insert your EMV card into the terminal, it will generate one time use passcode).

[CreditScholar]

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 I would personally prefer Chip & Signature over Chip & PIN.

I don't travel to Europe at all, and where I'm at now I still prefer to sign everything over using a PIN. Overall I'm fairly indifferent when it comes to swipe or chip, but I'll take a signature any day.

[SoCalBound]

Oh how I loathe Verified by Visa

[Cdnewmanpac]

A few thoughts:

1. Most European cc transactions occur offline. I suspect this is due to the much higher (and per minute) charges for internet service vs US. This is why the chip/pin system is valuable there. The pin code is contained on the chip itself, so the card reader verifies the user input with the information contained on the card. No interaction with the network (visa, amex, whatever) is required. In the US, just about every transaction occurs online. This allows the networks/banks to apply sophisticated anti-fraud algorithms to the individual transaction in real time. So the value of chip and pin in the US as a fraud detection tool is greatly diminished vs Europe. Given the added cost of chip and pin vs chip and signature, I can see why US merchants and card issuers favor chip and signature.

2. Chip and pin is defeatable- has been happening in England using a wedge (think about those movies where the break-in specialist defeats the alarm by sliding a piece of chewing gum wrapper into the circuit) that sends a "authenticated" signal back to the scanner, regardless of what pin is entered. 

3. Chips are coming to the US en masse in 2013. I know Amex has said they expect merchants to be able to accept EMV by April 2013. I know Visa and MC are doing something similar. Once the chip cards are useable in the US, I believe banks will migrate towards it fairly quickly. Regardless of pin or signature, the chips are a great tool for defeating duplication type fraud. But until there is a US market, I think banks will continue to restrict EMV cards to those targeting high end international travelers. See the current thread for the poor guy with marginal credit who is moving to England and can't find an EMV card he can qualify for. 

4. I don't think chips will push fraud liability towards the consumer. Too many customers use their cards for everyday transactions solely for the consumer protection (and thus generate swipe fees) for Visa and MC to ever allow shifting of fraud liability to customers. OTOH, I DO think we will see a shift towards placing fraud liability on the merchants. I know this is the "stick" Amex intends to use to force merchants to change to chip compatible card scanners. 

[stan_the_man]

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@Cdnewmanpac wrote:

A few thoughts:

1. Most European cc transactions occur offline. I suspect this is due to the much higher (and per minute) charges for internet service vs US. This is why the chip/pin system is valuable there. The pin code is contained on the chip itself, so the card reader verifies the user input with the information contained on the card. No interaction with the network (visa, amex, whatever) is required. In the US, just about every transaction occurs online. This allows the networks/banks to apply sophisticated anti-fraud algorithms to the individual transaction in real time. So the value of chip and pin in the US as a fraud detection tool is greatly diminished vs Europe. Given the added cost of chip and pin vs chip and signature, I can see why US merchants and card issuers favor chip and signature.

2. Chip and pin is defeatable- has been happening in England using a wedge (think about those movies where the break-in specialist defeats the alarm by sliding a piece of chewing gum wrapper into the circuit) that sends a "authenticated" signal back to the scanner, regardless of what pin is entered. 

3. Chips are coming to the US en masse in 2013. I know Amex has said they expect merchants to be able to accept EMV by April 2013. I know Visa and MC are doing something similar. Once the chip cards are useable in the US, I believe banks will migrate towards it fairly quickly. Regardless of pin or signature, the chips are a great tool for defeating duplication type fraud. But until there is a US market, I think banks will continue to restrict EMV cards to those targeting high end international travelers. See the current thread for the poor guy with marginal credit who is moving to England and can't find an EMV card he can qualify for. 

4. I don't think chips will push fraud liability towards the consumer. Too many customers use their cards for everyday transactions solely for the consumer protection (and thus generate swipe fees) for Visa and MC to ever allow shifting of fraud liability to customers. OTOH, I DO think we will see a shift towards placing fraud liability on the merchants. I know this is the "stick" Amex intends to use to force merchants to change to chip compatible card scanners. 

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Some of the largest merchants in the country just won a lawsuit against Visa and Mastercard -- this included the right to surchage CC transactions. These were the same people who got Congress to pass the Durbin amendment to fix the swipe fee for debit card transactions.

This merchant coalition has already hinted that they are taking the swipe fee to Congress. If the merchant banks lose this fight, lower swipe fees are on the way. You can bet that one of the first benefits that will be eliminated will be Visa's "Zero Liability" policy.

If the merchant banks lose, they will also target ways to increase their profitability. This could very well lead to merchants and banks teaming up to push fraud liability to consumers as part of a deal to lower swipe fees.

[FrugalRican]

In the end, consumers get screwed either way while merchants and banks duke this out and regardless of outcome.

[CreditScholar]

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@FrugalRican wrote:

In the end, consumers get screwed either way while merchants and banks duke this out and regardless of outcome.

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Looks like it's working as intended.

[Cdnewmanpac]

Visa/mc lost because of antitrust violations. You can be sure that they will learn from this experience and incorporate that knowledge into their efforts to speed Evm adoption. I also think efforts by the merchant association that risk pushing fraud liability onto consumers may split their alliance, as this would be the death knell of online commerce and too many of the big players in the association are too heavily invested online to let that happen. But time will tell who is right. In the meantime, I'm hoping at least one of my cards gets a chip before I head to tel aviv and edinborough next spring. If not, I may have to bump my southwest card from plus to premier, as I hear that one is getting chipped soon.

[Anonymous]

Speaking of the recent MC/VIsa lawsuit I heard Wal Mart and Target have rejected the settlement.

So that is good news right? If a majority of retailers reject it they will have to go back to the drawing board and work something out that doesn't involve surcharges. I do not want to live in a world of credit card surcharges. I am willing to have less generous rewards and signup bonuses if it means no credit card surcharges.

Hopefully the merchant organizations try to work this out with the banks instead of whining to the government. If that happens and we get another Durbin amendment for credit cards you can say goodbye not only to rewards, but to zero fraud liability as well, and in addition say goodbye to other perks like extended warranty, concierge, roadside assistance, etc. A credit card would just be a debit card that you can pay over time. No rewards and no consumer protections.

Personally if you ask me the merchants are just plain greedy. I can understand swipe fees are getting out of hand. If that is the case then don't accept credit cards, if enough retailers stop accepting credit cards then that forces MC and Visa to lower rates to get more acceptance. Nothing is stopping the merchants from only taking cash, check, and pin based debit. They just want to have their cake and eat it too with credit cards.